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Myriad Genetics shares retreat on Court decision

Matt Krantz, USA TODAY
6:55 p.m. EDT June 13, 2013

People walk near the U.S. Supreme Court building Thursday in Washington D.C. The U.S. Supreme Court has ruled in the Association for Molecular Pathology v. Myriad Genetics case that human genes cannot be patented, but that synthetically produced genetic material can.(Photo: Mark Wilson, Getty Images)

Investors initially pushed the stock up by focusing on the bright side of the ruling. The Supreme Court said Myriad does have the legal right to patent forms of human's genetic code that can be predictive of who might contract breast or ovarian cancer, says Michael Bennett, professor of law at Northeastern University. Investors may have been expecting the company to lose all its claims, so the fact were were upheld was a comfort, he says.

The decision was considered a victory for cancer patients and other genetic companies since the field for research is left open for all to pursue.

But the Supreme Court's move was also decidedly negative for Myriad, as it "seems pretty clear that other people will be able to offer DNA testing for breast and ovarian cancer genes, which is central to their (Myriad's) business," says Charles Rothfeld, an attorney with Mayer Brown.

Investors' initial positive feelings about having the Supreme Court ruling behind them might be fleeting, says Daniel Leonard of Leerink Swann in a note to clients. Investors will soon focus on the fact that with more competition, Myriad's "dominant" market share "has nowhere to go but down," Leonard wrote. He points out that others rivals, including BRLI, University of Washington and Ambry Genetics have already stated they have plans to get into the business. Myriad's patents were due to expire in December 2015 regardless of the decision, Leonard says.

For the stock to move higher from current levels, Myriad would need to maintain its 70% or higher market share of hereditary cancer testing, Leonard says, and pricing must hold steady at between $3,000 and $4,000. Leonard instead thinks Myriad's share might fall to 55% and pricing decline below $3,000.